VES-13-18-CO:R:IT:C 111443 GEV
Gerald A. Malia, Esq.
Ragan & Mason
1156 Fifteenth Street, N.W.
Washington, D.C. 20005
RE: Vessel Repair; S/S KINSMAN INDEPENDENT; Casualty; Great
Lakes; Leaving U.S. Waters; 19 U.S.C. 1466(d)(1)
Dear Mr. Malia:
This is in response to your letter dated December 17, 1990,
on behalf of your client, Kinsman Lines, Inc., requesting an
advisory ruling on the dutiability of repairs to be performed on
the S/S KINSMAN INDEPENDENT in Thunder Bay, Ontario, Canada.
Our ruling on this matter is set forth below.
FACTS:
The S/S KINSMAN INDEPENDENT is a U.S.-flag Great Lakes bulk
carrier owned by Minch Transit Company and operated by Kinsman
Lines, Inc., pursuant to a bareboat charter agreement. The
subject vessel's home port is Cleveland, Ohio.
On November 24, 1990, while proceeding in ballast from
Buffalo, New York, to Thunder Bay, Ontario, Canada, where a cargo
of grain was to be loaded, the subject vessel ran aground as a
result of a navigational error. The grounding occurred in
Siskiwit Bay just off Isle Royale, Michigan. With tug
assistance, the vessel was finally freed and re-floated on
November 25, 1990.
Upon re-floating the vessel, an underwater inspection of the
vessel's hull could not be carried out on the scene because of
high seas. Therefore it was determined that the vessel proceed
to the closest harbor of refuge, Thunder Bay, to inspect its
hull. While at anchor in Thunder Bay an underwater inspection
revealed severe damage to the hull bottom including many long
rips and tears. Based on this inspection the vessel was
immediately dry-docked at Thunder Bay, the nearest capable
facility, for further inspections and repairs.
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It is stated that Thunder Bay, located between 50-60 miles
from the point of grounding, is the only place on Lake Superior
where the necessary repairs can be undertaken. The only other
port available to the subject vessel on Lake Superior is Duluth,
Minnesota, which is located approximately 150 miles from the
point of grounding and which would have required the transit of a
large, open portion of Lake Superior, which would have made the
vessel vulnerable to potentially dangerous sea conditions. The
transit from Isle Royale to Thunder Bay, in addition to being a
much shorter passage, involves much more sheltered waters.
It is contended that the damage in question was caused by a
casualty occurrence and therefore remission on the cost of the
foreign repairs should be granted pursuant to 19 U.S.C.
1466(d)(1). In support of this claim the following
documentation has been submitted: a letter from Kabro Marine
Contractors, Inc. to Kinsman Lines, Inc. containing the divers'
report and recommendations regarding the grounding of the subject
vessel (Exhibit A); the U.S. Coast Guard's permit to proceed to
Thunder Bay (Exhibit B); the Canadian Coast Guard's permit to
proceed to Thunder Bay (Exhibit C); a letter dated December 11,
1990 from Port Arthur Shipbuilding Company setting forth the
breakdown of repair costs and having attached a copy of the Field
Survey Report (Exhibit C); a photocopy of the relevant page of
the ship's log (Exhibit D); a letter dated December 6, 1990,
from the American Bureau of Shipping to Kinsman Lines, Inc.
relative to maintenance of the vessel's class (Exhibit F); a
letter dated November 28, 1990, from The Salvage Association
pertaining to a survey of the damage in question (Exhibit G); a
typewritten transcript of the statement of the master of the
vessel setting forth the facts surrounding the grounding of the
vessel (Exhibit H); and ten photographs of the vessel while in
dry dock revealing the extensive damage to the hull bottom.
ISSUE:
Whether evidence is presented sufficient to prove that the
foreign repairs performed on the subject vessel were necessitated
by a casualty occurrence, thus warranting remission pursuant to
19 U.S.C. 1466(d)(1).
LAW AND ANALYSIS:
Title 19, United States Code, section 1466, provides in
pertinent part for payment of duty in the amount of 50 percent ad
valorem on the cost of foreign repairs to vessels documented
under the laws of the United States to engage in foreign or
coastwise trade, or vessels intended to engage in such trade.
Pursuant to Presidential Proclamation 5923 of December 14, 1988,
effective January 1, 1989, all such costs incurred in Canada are
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dutiable at a rate of 45 percent ad valorem and shall decrease at
5 percent increments on January 1 of each successive year until
January 1, 1998, when duty on Canadian work assessed pursuant to
19 U.S.C. 1466 will be eliminated.
Section 1466(d)(1) provides for remission of the above
duties in those instances where good and sufficient evidence is
furnished to show that foreign repairs were compelled by "stress
of weather or other casualty" necessary to secure the safety and
seaworthiness of the vessel to enable her to reach her port of
destination.
The term "casualty", as it is used in the vessel repair
statute (19 U.S.C. 1466) has been interpreted by the Customs
Court as something which, like stress of weather, comes with
unexpected force or violence, such as a fire, explosion, or
collision (see Dollar Steamship Lines, Inc., v. United States,
5 Cust. Ct. 28-29, C.D. 362 (1940)). It should be noted that
absent specific evidence to the contrary, we consider foreign
repairs to have been necessitated by normal wear and tear, a
result which does not permit remission (see C.S.D. 79-32).
The Customs Service has consistently held that the grounding
of a vessel constitutes a "casualty" as that term is used in
section 1466(d)(1), and that duties on repairs necessitated by a
grounding are remissible if the repairs are performed to secure
the safety and seaworthiness of the vessel (see C.S.D. 89-61,
citing C.I.E.'s 1822/58, 1823/58 and 1160/60).
Upon reviewing the record in its entirety, there is no
question the damage in this case was clearly the result of an
adequately documented "casualty" within the meaning of section
1466(d)(1). We note, however, that in this case we are requested
to grant remission for a vessel which has incurred damage in U.S.
waters and has departed U.S. waters to obtain foreign repairs.
We have previously denied such requests regarding any vessel
exiting U.S. waters (and consequently bypassing U.S. yards) in
view of the fact that such a vessel could not have been
"...compelled...to put into such foreign port...to secure the
safety and seaworthiness of the vessel..."
The circumstances of this case, however, are
distinguishable from those discussed above. The closest port on
Lake Superior, foreign or domestic, to the point of grounding
that is capable of performing the necessary repairs is Thunder
Bay. We note the master's statement that, "We were never in any
danger of sinking." (see Exhibit H). However, it is the
recommendation of Kabra Marine Contractors, the company that
performed the underwater inspection prior to the dry-docking,
that "To expose the ship to high seas in its present condition
may render the structural integrity of the ship's hull unsafe."
(see Exhibit A) In view of this, we are of the opinion that to
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direct the vessel to proceed in its damaged condition to Duluth,
Minnesota, the next available port on Lake Superior,
approximately 100 more miles from the point of grounding than is
Thunder Bay, and over potentially dangerous ocean-like conditions
could unnecessarily imperil the vessel and her crew.
Accordingly, the request for remission of the cost of Canadian
repairs in this case is warranted.
HOLDING:
The evidence presented is sufficient to prove that foreign
repairs performed on the subject vessel for which relief is
sought were necessitated by a casualty occurrence. Accordingly,
remission pursuant to 19 U.S.C. 1466(d)(1) should be granted.
It is noted, however, that this ruling is merely advisory in
nature and does not eliminate the requirement to declare work
done abroad at the subject vessel's first United States port of
arrival, nor does it eliminate the requirement of filing the
entry showing this work (see sections 4.14(b)(1)(2), Customs
Regulations (19 CFR 4.14(b)(1)(2)). Furthermore, any final
ruling on this matter is contingent on Customs review of the
evidence submitted pursuant to section 4.14(d)(1), Customs
Regulations (19 CFR 4.14(d)(1))).
Sincerely,
B. James Fritz
Chief
Carrier Rulings Branch